Fingers crossed: The outlook for SDG&E bills in the new year appears positive

Heading into the new year, San Diego Gas & Electric officials said Tuesday the outlook for customer bills looks pretty good.

Unlike last winter, when natural gas prices spiked to record highs, SDG&E expects monthly bills for its 905,000 customers with gas hookups to return to levels typically seen in previous years.

“The market factors are trending in the right direction,” said Adam Pierce, SDG&E’s vice president of energy procurement and rates. “We’ll be continuing to monitor the market to make sure we don’t see any major disruptions and if we do see that, we’ll make sure to reach out to our customers as soon as possible.”

As for electricity rates, the utility anticipates an average residential customer in January 2024 will see a slight decrease in the costs of delivering electricity compared to this month — a 1.2-cent drop from 22.4 cents per kilowatt-hour to 21.1 cents.

For a typical SDG&E residential customer, that translates to an estimated decrease of $5 in the January bill (from $142 to $137) compared to this month.

SDG&E officials attributed the lower transmission and distribution delivery costs to a number of reasons, including a 7 percent bump in electricity sales.

As more electric vehicles come onto the San Diego market and an increasing number of homes and businesses move to all-electric appliances, the fixed costs of running the system are spread over a wider base of customers. That, the utility said, puts downward pressure on delivery costs for the 3.7 million consumers in its service territory.

Lower delivery costs also figure to have a positive effect on San Diego’s two community choice energy programs — San Diego Community Power and the Clean Energy Alliance.

While San Diego Community Power and the Clean Energy Alliance purchase the power contracts for their respective customers, SDG&E is still responsible for the transmission and distribution delivery costs of the two entities.

Barbara Boswell, CEO of the Clean Energy Alliance, said the $5 in estimated savings per month for electricity delivery will be passed on to community choice energy customers, too.

“A reduction in the delivery charge is good news for everybody,” she said.

Why natural gas bills figure to be lower

The outlook for homes and businesses that use natural gas in SDG&E’s service territory looks decidedly better this winter.

The commodity, or wholesale, price of natural gas reached $1.05 per therm in December 2022 and soared to $3.45 per therm one month later. A therm refers to one unit of natural gas.

By contrast, SDG&E’s commodity price for natural gas this month stands at 56 cents per therm. The January price won’t be posted for a few weeks and the gas market is often volatile, but things look better. The reasons:

• No major interruptions of service have been reported. Last year, a ruptured natural gas pipeline in Arizona cut off supplies to Southern California.
  
• Weather so far this winter across California has not been as cold or wet as last year, so demand for natural gas heating has been lower.
  
• Storage inventories of natural gas in Southern California are 29 percent higher than this time last year.

Investor-owned utilities such as SDG&E cannot profit on the price of electricity or natural gas, as per rules laid out by the California Public Utilities Commission. Costs are passed directly through — meaning if power company pays $1 for natural gas in the commodity market, that’s what customers pay.

“We’re happy to see a rate decrease going into effect January 2024,” Pierce of SDG&E said, “but we continue to be focused on affordability and want to sure we’re operating as efficiently as possible, pursuing residential rate reform to make rates more equitable.”

High utility bills

Rates are a sore subject for many.

Reports compiled by the U.S. Bureau of Labor Statistics consistently show the average electricity price per kilowatt-hour in the greater San Diego region is the highest in the country. In October, it came to 47.5 cents, with Urban Hawaii in second place at 43 cents.

Going forward, SDG&E is currently going through a long and complicated proceeding with the utilities commission, known as the CPUC, to determine what utility bills will cost in the next four-year cycle.

Under SDG&E’s proposal, typical residential customers using 400 kilowatt-hours would see an $8.45 increase per month in their electricity bills in 2024 through 2027.

At public meetings to discuss the General Rate Case proceeding, many SDG&E customers have angrily told CPUC officials they don’t want their bills to go any higher.

“I am sleeping in long underwear and sweats because I don’t turn on my heater,” a retiree in Poway said when she called into a virtual hearing in March.

SDG&E officials gave a 20-minute presentation Tuesday about the 2024 outlook to the San Diego City Council and fielded a host of skeptical questions and remarks.

“I’m glad to see that prices are coming down a little bit, but they’re still too high,” said Councilmember Marni von Wilpert.

The CPUC makes the final decision on whether to accept, reject or modify SDG&E’s request. A proposed decision is expected to be released in the second quarter of next year, with a vote by the CPUC’s five commissioners likely coming shortly thereafter.